Bigbasket should be shut under new FDI norms, says Kishore Biyani

On Tuesday, DIPP said 100% FDI is allowed only in e-comm marketplaces, and not inventory-based modelsDigbijay Mishra&Anand J | TNN | March 31, 2016, 09:15 IST

Kishore Biyani A day after the government clarified that foreign direct investment (FDI) is not allowed in inventory-based e-commerce, Future Group CEO Kishore Biyani trained guns on the country’s leading online grocer Bigbasket, terming its operation as illegal. Biyani, a pioneer in the traditional retailing industry, said under the new guidelines Bigbasket should ideally be shut immediately.

“As we speak, Bigbasket’s inventory-led model has become totally illegal as per latest government notifications. They don’t have any seller and directly sell to the consumers,” Biyani, a vociferous campaigner for a level playing field for traditional and online retailers, told TOI. Biyani’s tirade would also turn the heat on other startups like online lingerie firm Zivame and fashion retailers Jabong and Myntra, all of which have a significant inventory-led business.

On Tuesday, the department of industrial policy and promotion (DIPP) said 100% FDI is allowed only in e-commerce marketplaces, and not inventory-based models.

Bigbasket mostly operates an inventory-led model and garners about 33% of total sales from its private brands. Bigbasket said it would not respond to Biyani. “We are looking at our legal position. The view is that there is no cause for concern,” Hari Menon, CEO and co-founder, Bigbasket, said. The e-grocer has raised $210 million so far, mostly from foreign investors. Bigbasket directly competes with Biyani’s Big Bazaar stores.

Mohan Kumar, partner at Norwest Venture Partners, said, “Even these guidelines would not be considered as final and there will be more revisions. This was not meant to be a punitive measure but to bring more clarity. The government is not going to enforce this from tomorrow.”

It is not just the inventory-based e-commerce players who will struggle with the new regulations. Online fashion retailers Myntra and Jabong will have to display the names of the sellers prominently alongside products, which these companies don’t do now. The DIPP guidelines stipulate that the market places should display the name and address of the sellers on the website apart from shifting the onus of customer satisfaction onto the seller rather than the platform.

German internet firm Rocket Internet-backed Jabong follows a mixed model of inventory and marketplace, a source said. But the company is increasingly moving towards a marketplace model.